Exhibit 5(aa)
SUB-INVESTMENT MANAGEMENT AGREEMENT
AMONG
XXXX XXXXXXX VARIABLE SERIES TRUST I
MELLON BOND ASSOCIATES, LLP
AND
XXXX XXXXXXX MUTUAL LIFE INSURANCE COMPANY
SUB-INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 20th day of April, 1998 by and among Xxxx Xxxxxxx
Variable Series Trust I, a Massachusetts business trust (the "Series"), Mellon
Bond Associates, LLP, a Pennsylvania limited liability partnership ("Advisers"),
and Xxxx Xxxxxxx Mutual Life Insurance Company, a Massachusetts corporation
("JHMLICO").
WHEREAS, the Series is organized and is engaged in business as an open-end
management investment company and is so registered under the Investment Company
Act of 1940 (the "1940 Act"); and
WHEREAS, JHMLICO and Advisers are each engaged in the business of rendering
investment advice under the Investment Advisers Act of 1940; and
WHEREAS, the Series is authorized to issue shares of capital stock in
separate classes with each such class representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Series offers shares in several classes, one of which is
designated as the Bond Index Portfolio (together with all other classes
established by the Series, collectively referred to as the "Portfolios"), each
of which pursues its investment objectives through separate investment policies;
and
WHEREAS, the Series has retained JHMLICO to render investment management
services to the Series pursuant to an Investment Management Agreement dated as
of April 14, 1998 (the "Investment Management Agreement"), pursuant to which it
may contract with Advisers as a sub-manager as provided for herein;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF SUB-MANAGER
(a) Subject Portfolio. Advisers is hereby appointed and Advisers hereby
-----------------
accepts the appointment to act as investment adviser and manager to the Bond
Index Portfolio (the "Subject Portfolio") for the period and on the terms herein
set forth, for the compensation herein provided.
(b) Additional Subject Portfolios. In the event that the Series and JHMLICO
-----------------------------
desire to retain Advisers to render investment advisory services hereunder for
any other Portfolio, they shall so notify Advisers in writing. If it is willing
to render such services, Advisers shall notify the Series in writing, whereupon
such Portfolio shall become a Subject Portfolio hereunder.
(c) Incumbency Certificates. Advisers shall furnish to JHMLICO, immediately
-----------------------
upon execution of this Agreement, a certificate of a senior officer of Advisers
setting forth (by name and title, and including specimen signatures) those
officers of Advisers who are authorized to make investment decisions for the
Subject Portfolio pursuant to the provisions of this Agreement. Advisers shall
promptly provide supplemental certificates in connection with each additional
Subject Portfolio (if any) and further supplemental certificates, as needed, to
reflect all changes with respect to such authorized officers for any Subject
Portfolio. On behalf of the Series, JHMLICO shall instruct the custodian for
the Subject Portfolio to accept instructions with respect to the Subject
Portfolio from the officers of Advisers so named.
(d) Independent Contractor. Advisers shall for all purposes herein be
----------------------
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or be deemed an agent of
the Series.
(e) Advisers' Representations. Advisers represents, warrants and agrees (i)
-------------------------
that it is registered as an investment adviser under the Investment Advisers Act
of 1940, and that it will remain so registered and will comply with the
requirements of said Act, and the rules and regulations thereunder, at all times
while this Agreement remains in effect, (ii) that it will promptly notify
JHMLICO if the foregoing representation and agreement shall cease to be true (in
any material respect) at any time during the term of this Agreement, (iii) that
it will promptly notify JHMLICO of any material change in the senior management
or ownership of Advisers, or of any change in the identity of the personnel who
manage the Subject Portfolio, (iv) that it has adopted a Confidential
Information and Securities Trading Policy which is described in Advisers' Form
ADV and which complies with the requirements of Rule 17j-1 of the Securities and
Exchange Commission (the "SEC") under the 1940 Act, and has adopted procedures
designed to prevent violations of such policy, and (v) that it has furnished the
Series and JHMLICO each with a copy of Advisers' Form ADV, as most recently
filed with the SEC, and will promptly furnish copies of each future amendment
thereto.
2. PROVISION OF INVESTMENT MANAGEMENT SERVICES.
Advisers will provide for the Subject Portfolio a continuing and suitable
investment program consistent with the investment policies, objectives and
restrictions of said Portfolio, as established by the Series and JHMLICO and
communicated to Advisers in writing. From time to time, JHMLICO or the Series
shall promptly provide Advisers with any additional or amended investment
policies, guidelines and restrictions in writing. Advisers, as sub-manager,
will manage the investment and reinvestment of the assets in the Subject
Portfolio, and perform the functions set forth below, subject to the overall
supervision, direction, control and review of JHMLICO and the Board of Trustees
of the Series, consistent with the applicable investment policies, guidelines
and restrictions, the provisions of the Series' Declaration of Trust, Bylaws,
prospectus, statement of additional information (each as in effect and as
communicated in writing to Advisers from time to time), the 1940 Act and all
other applicable laws and regulations (including any applicable investment
restrictions imposed by state insurance laws and regulations or any directions
or instructions as may be delivered to Advisers in writing by JHMLICO or the
Series from time to time). By its signature below, Advisers
-2-
acknowledges receipt of a copy of the Series' Declaration of Trust, Bylaws,
prospectus, and statement of additional information, each as in effect on the
date of this Agreement.
Advisers will, at its own expense:
(a) advise the Series in connection with investment policy decisions to be
made by its Board of Trustees or any committee thereof regarding the Subject
Portfolio and, upon request, furnish the Series with research, economic and
statistical data in connection with said Subject Portfolio's investments and
investment policies;
(b) submit such reports and information as JHMLICO or the Series' Board of
Trustees may reasonably request, to assist the custodian in its determination of
the market value of securities held in the Subject Portfolio;
(c) place orders for purchases and sales of portfolio investments for the
Subject Portfolio;
(d) give instructions to the Subject Portfolio's custodian concerning the
delivery of securities and transfer of cash for the Subject Portfolio;
(e) maintain and preserve the records relating to its activities hereunder
required by the 1940 Act to be maintained and preserved by the Series, to the
extent not maintained by the custodian, transfer agent or JHMLICO;
(f) at the close of business each day, provide JHMLICO and the custodian
with copies of trade tickets, electronic access to trade records, or other means
to verify trade data received by the custodian from third parties for each
transaction effected for the Subject Portfolio, and promptly forward to the
custodian copies of all brokerage or dealer confirmations;
(g) as soon as practicable following the end of each calendar month, provide
JHMLICO with written statements showing all transactions effected for the
Subject Portfolio during the month, a summary listing all investments held in
such Subject Portfolio as of the last day of the month, and such other
information as JHMLICO may reasonably request in connection with the accounting
services that JHMLICO provides for the Subject Portfolio; and
(h) absent specific written instructions to the contrary provided to it by
JHMLICO and subject to its receipt of all necessary voting materials, vote all
proxies with respect to investments of the Subject Portfolio in accordance with
Advisers' proxy voting policy as most recently provided to JHMLICO.
On its own initiative, Advisers will apprise JHMLICO and the Series of
important political and economic developments materially affecting the
marketplace or the Subject Portfolio, and will furnish JHMLICO and the Series'
Board of Trustees from time to time such information as is appropriate for this
purpose. Advisers will also make its personnel available in Boston or other
reasonable locations as often as quarterly to discuss the Subject Portfolio and
Advisers' management thereof, to educate JHMLICO sales personnel with respect
thereto, and for such other purposes as the Series or JHMLICO may reasonably
request.
-3-
The Series and JHMLICO will provide timely information to Advisers regarding
such matters as purchases and redemptions of shares in the Subject Portfolio and
the cash requirements of, and cash available for investment in, the Portfolio.
JHMLICO will timely provide Advisers with copies of monthly accounting
statements for the Subject Portfolio, and such other information (including,
without limitation, reports concerning the classification of Portfolio
securities for purposes of Subchapter M of the Internal Revenue Code and
Treasury Regulations Section 1.817) as may be reasonably necessary or
appropriate in order for Advisers to perform its responsibilities hereunder.
3. ALLOCATION OF EXPENSES.
Each party to this Agreement shall bear the costs and expenses of performing
its obligations hereunder. In this regard, the Series specifically agrees to
assume the expense of:
(a) brokerage commissions for transactions in the portfolio investments of
the Series and similar fees and charges for the acquisition, disposition,
lending or borrowing of such portfolio investments;
(b) custodian fees and expenses;
(c) all taxes, including issuance and transfer taxes, and reserves for
taxes payable by the Series to federal, state or other governmental agencies;
and
(d) interest payable on the Series' borrowings.
Nothing in this Agreement shall alter the allocation of expenses and costs
agreed upon between the Series and JHMLICO in the Investment Management
Agreement or any other agreement to which they are parties.
4. SUB-ADVISORY FEES.
For all of the services rendered with respect to the Subject Portfolio as
herein provided, JHMLICO shall pay to Advisers a fee (for the payment of which
the Series shall have no obligation or liability), based on the Current Net
Assets of the Subject Portfolio, as set forth in Schedule I attached hereto and
made a part hereof. Such fee shall be accrued daily and payable monthly, as
soon as practicable after the last day of each calendar month. In the case of
termination of this Agreement with respect to the Subject Portfolio during any
calendar month, the fee with respect to such Portfolio accrued to but excluding
the date of termination shall be paid promptly following such termination. For
purposes of computing the amount of advisory fee accrued for any day, "Current
Net Assets" shall mean the Subject Portfolio's net assets as of the most recent
preceding day for which the Subject Portfolio's net assets were computed.
5. PORTFOLIO TRANSACTIONS.
In connection with the investment and reinvestment of the assets of the
Subject Portfolio, Advisers is authorized to select the brokers or dealers that
will execute purchase and sale transactions for the Portfolio and to use its
best efforts to obtain best execution with respect to all such purchases
-4-
and sales of portfolio securities for said Portfolio. Advisers shall maintain
records adequate to demonstrate compliance with this requirement. Subject to
this primary requirement, and after considering the potential benefits to the
Subject Portfolio and its shareholders, Advisers shall have the right subject to
the control of the Board of Trustees, and to the extent authorized by the
Securities Exchange Act of 1934, to follow a policy of selecting brokers who
furnish brokerage and research services to Advisers, and who charge a higher
commission rate to the Subject Portfolio than may result when allocating
brokerage solely on the basis of best execution. Advisers shall determine in
good faith that such higher cost was reasonable in relation to the value of the
brokerage and research services provided.
Advisers will not receive any tender offer solicitation fees or similar
payments in connection with the tender of investments of any Subject Portfolio.
6. OWNERSHIP OF INFORMATION, RECORDS, AND CONFIDENTIALITY.
The Series shall own and control all records maintained hereunder by Advisers
on the Series' behalf and, in the event of termination of this Agreement with
respect to any Subject Portfolio for any reason, all records relating to that
Subject Portfolio shall be promptly returned to the Series, free from any claim
or retention of rights by Advisers, provided that (subject to the last paragraph
of this Section 6) Advisers may retain copies of such records. Advisers also
agrees, upon request of the Series, promptly to surrender such books and records
or, at its expense, copies thereof, to the Series or make such books and records
available for audit or inspection by representatives of regulatory authorities
or other persons reasonably designated by the Series. Advisers further agrees
to maintain, prepare and preserve such books and records with respect to the
Subject Portfolio's transactions in accordance with the 1940 Act and rules
thereunder, including but not limited to subparagraphs (b)(5),(6),(7),(9),(10)
and (11) and paragraph (f) of Rule 31a-1, and to supply all information
requested by any insurance regulatory authorities to determine whether all
insurance laws and regulations are being complied with. For the duration of
this Agreement, Advisers shall preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be maintained by it
pursuant to this Agreement and shall transfer said records to JHMLICO upon
termination of this Agreement. Advisers shall supply the Board of Trustees and
officers of the Series and JHMLICO with all statistical information regarding
investments which is reasonably required by them and reasonably available to
Advisers.
Advisers shall not disclose or use any records or information obtained
pursuant hereto in any manner whatsoever except as expressly authorized herein,
and will keep confidential any information obtained pursuant hereto, and
disclose such information only if the Series has authorized such disclosure, or
if such disclosure is expressly required by applicable federal or state
regulatory authorities.
7. LIABILITY; STANDARD OF CARE.
No provision of this Agreement shall be deemed to protect Advisers or JHMLICO
against any liability to the Series or its shareholders to which it might
otherwise be subject by reason of any willful misfeasance, bad faith or
negligence in the performance of its duties or the reckless disregard
-5-
of its obligations and duties under this Agreement or, with respect to JHMLICO,
under the Investment Management Agreement. Nor shall any provision hereof be
deemed to protect any trustee or officer of the Series against any such
liability to which he might otherwise be subject by reason of any willful
misfeasance, bad faith or negligence in the performance his duties or the
reckless disregard of his obligations and duties. Adviser shall employ only
qualified personnel to manage the Subject Portfolio; shall comply with all
applicable laws and regulations in the discharge of its duties under this
Agreement; shall (as provided in Section 2 above) comply with the investment
policies, guidelines and restrictions of the Subject Portfolio and with the
provisions of the Series' Declaration of Trust, Bylaws, prospectus and statement
of additional information as communicated to it in writing; shall manage the
Subject Portfolio (subject to the receipt of, and based upon the information
contained in, periodic reports from JHMLICO or the custodian concerning the
classification of Portfolio securities for such purposes) as a regulated
investment company in accordance with subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), and Treasury Regulations Section 1.817-5(b);
shall act at all times in the best interests of the Series; and shall discharge
its duties with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent person acting in a like capacity and familiar
with such matters would use in the conduct of a similar enterprise. However,
Advisers shall not be obligated to perform any service not described in this
Agreement, and shall not be deemed by virtue of this Agreement to have made any
representation or warranty that any level of investment performance or level of
investment results will be achieved.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
--------
Subject Portfolio on the date hereof and, with respect to any additional Subject
Portfolio, on the date of receipt by the Series of notice from Advisers in
accordance with Paragraph 1(b) hereof that it is willing to serve with respect
to such Portfolio. Unless terminated as herein provided, this Agreement shall
remain in full force and effect for two years from the date hereof with respect
to the initial Subject Portfolio and, with respect to each additional Subject
Portfolio, until two years following the date on which such Portfolio becomes a
Subject Portfolio hereunder, and shall continue in full force and effect
thereafter with respect to each Subject Portfolio so long as such continuance
with respect to any such Portfolio is approved at least annually (a) by either
the Board of Trustees of the Series or by vote of a majority of the outstanding
voting shares of such Portfolio, and (b) in either event by the vote of a
majority of the trustees of the Series who are not parties to this Agreement or
"interested persons" of any such party, cast in person at a meeting called for
the purpose of voting on such approval.
Any approval of this Agreement by the holders of a majority of the
outstanding shares of any Subject Portfolio shall be effective to continue this
Agreement with respect to any such Subject Portfolio notwithstanding (A) that
this Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Portfolio affected hereby, and (B) that this
Agreement has not been approved by the vote of a majority of the outstanding
shares of the Series, unless such approval shall be required by any other
applicable law or otherwise. The terms "assignment," "vote of a majority of the
outstanding shares" and "interested person," when used in this Agreement, shall
have the respective meanings specified in the 1940 Act and rules thereunder.
(b) Termination. This Agreement may be terminated with respect to any
-----------
Subject Portfolio at any
-6-
time, without payment of any penalty, by the Series pursuant to a vote of the
trustees of the Series or a vote of a majority of the outstanding shares of such
Subject Portfolio, which termination shall be effective immediately upon
delivery of notice thereof to Advisers and JHMLICO. This Agreement may be
terminated by Advisers on at least ninety days' prior written notice to the
Series and JHMLICO, and may be terminated by JHMLICO on at least ninety days'
prior written notice to the Series and Advisers.
(c) Automatic Termination. This Agreement shall automatically and
---------------------
immediately terminate in the event of its assignment (other than as permitted
pursuant to Section 15 below) or if the Investment Management Agreement is
terminated.
9. SERVICES NOT EXCLUSIVE; USE OF ADVISERS' NAME AND LOGO.
The services of Advisers to the Series are not to be deemed exclusive and it
shall be free to render similar services to others so long as its services
hereunder are not impaired thereby. It is specifically understood that
directors, officers and employees of Advisers and of its subsidiaries and
affiliates may continue to engage in providing portfolio management services and
advice to other investment companies, whether or not registered, and other
investment advisory clients.
During the term of this Agreement, JHMLICO and the Series shall have the
non-exclusive and non-transferable right to use Advisers' name and logo in all
materials relating to the Subject Portfolio, including all prospectuses, proxy
statements, reports to shareholders, sales literature and other written
materials prepared for distribution to shareholders of the Series or the public.
However, prior to distribution of any materials which refer to Advisers, JHMLICO
shall consult with Advisers and shall furnish to Advisers a copy of such
materials. Advisers agrees to cooperate with JHMLICO and to review such
materials promptly. JHMLICO shall not distribute such materials if Advisers
reasonably objects in writing, within five (5) business days of its receipt of
such copy (or such other time as may be mutually agreed), to the manner in which
its name and logo are used.
10. AVOIDANCE OF INCONSISTENT POSITION.
In connection with the purchase and sale of portfolio securities of the
Subject Portfolio, Advisers and its directors, officers and employees will not
act as principal or agent or receive any commission. Nothing in this Agreement,
however, shall preclude the combination of orders for the sale or purchase of
portfolio securities of the Subject Portfolio with those for other registered
investment companies managed by Advisers or its affiliates, if orders are
allocated in a manner deemed equitable by Advisers among the accounts and at a
price approximately averaged.
11. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing. No amendment of this
Agreement shall be effective with respect to any Subject Portfolio until
approved specifically by (a) the Board of Trustees of the Series, or by vote of
a majority of the outstanding shares of that Subject Portfolio, and (b) by vote
of a majority of those trustees of the Series who are not interested persons of
any party to this Agreement cast in person at a meeting called for the purpose
of voting on such approval.
-7-
12. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Series hereunder shall
not be binding upon any of the trustees, shareholders, officers, agents or
employees of Series personally, but only bind the trust property of the Series,
as provided in the Series' Declaration of Trust.
13. NOTICES
Notices and other communications required or permitted under this Agreement
shall be in writing, shall be deemed to be effectively delivered when actually
received, and may be delivered by US mail (first class, postage prepaid), by
facsimile transmission, by hand or by commercial overnight delivery service,
addressed as follows:
ADVISERS: Mellon Bond Associates
Xxx Xxxxxx Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx X. XxXxxx, President and CEO
Fax #: 000-000-0000
JHMLICO: Xxxx Xxxxxxx Mutual Life Insurance Company
000 Xxxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Fax #: 000-000-0000
SERIES: Xxxx Xxxxxxx Variable Series Trust I
000 Xxxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Fax #: 000-000-0000
14. GOVERNING LAW.
This agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act and
rules thereunder.
15. ASSIGNMENT.
This Agreement may not be assigned by any party, either in whole or in part,
without the prior written consent of each other party.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day first set forth above.
ATTEST: XXXX XXXXXXX VARIABLE SERIES
TRUST I
/s/ Xxxxxx X. XxXxxx By: /s/ Xxxxx X. Xxxx
Assistant Secretary -------------------------------
Title: Chairman and CEO
ATTEST: XXXX XXXXXXX MUTUAL LIFE
INSURANCE COMPANY
/s/ Xxxxxxxxxx Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
Assistant Secretary -------------------------------
Title: Vice President
ATTEST: MELLON BOND ASSOCIATES, LLP
/s/ Xxxxxx X. Xxxx By: /s/ Xxxx X. XxXxxx
Vice President -------------------------------
Title: President and CEO
SCHEDULE I
FEES
----
Current Net Assets Under Management Sub-Advisory Fee
----------------------------------- ----------------
On the first $100,000,000 8 basis points (0.08%) per annum
On the next $150,000,000 6 basis points (0.06%) per annum
On amounts over $250,000,000 4 basis points (0.04%) per annum
